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Released November 30, 2004

Automatic Identification When to Use RFID

A Case Study on Selecting AIDC Technologies
by the U.S. Postal Service


Introduction to AIDC, Barcode, and RFID

Radio Frequency Identification (RFID) and barcodes are two dominant technologies
in Automatic Identification and Data Capture (AIDC). Other AIDC technologies
include smart card, magnetic strips, and touch memory. The core functions of an
AIDC technology are to apply an identification code to an object or store other
information, and read the code or information at a later date for identification or
tracking purposes with minimal human intervention.

Barcode technology is based on spatially modulated patterns printed on suitable
substrate (such as paper) to encode static information. Barcode readers with line-of-
sight with respect to the barcode can automatically locate and decode the barcode
at high speed with very high reliability. With the adoption of Universal Product Code
(UPC) for retail product labeling in 1974, barcode has become the ubiquitous AIDC
technology in material distribution and retail operations.

RFID is based on a tag consisting of an electronic chip and antenna that responds to
a reader using radio frequency signals to decode the information encoded in the
chip. RFID offers several advantages over barcode identification, including a higher
information carrying capacity, the ability to change the information encoded, and a
longer read range without the direct line-of-sight requirements. While RFID has
become a hot topic over the past several years, its applications started several
decades ago. Retail stores began to use RFID as electronic article surveillance for
antitheft purposes in the 1970s. Wild life management and the cattle industry also
began to use RFID to tag and track animals. Electronic toll collection and security
access using RFID became widespread in the 1980s. Applying RFID to supply chain
management and material distribution began to gain popularity in the 1990s.

Facing the RFID Challenge

With the U.S. Department of Defense and large retailers like Wal-Mart mandating
the use of RFID in their supply chain, RFID has been looked upon by various
industries as an emerging technology that will some day replace barcodes. Many
organizations are facing, or will soon face, an important task of having a technology
strategy to adopt RFID when and where it is appropriate or mandatory. ICF

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Released November 30, 2004
Consulting provides technology management consulting services to various clients
to help them understand how their organizations should be positioned to respond
to this seemingly unstoppable wave of change. This white paper provides an
overview of our approach and experience with one of our clients, the U.S. Postal
Service.

Helping the U.S. Postal Service Determine the Appropriate AIDC Technology

Technology is not an end by itself; rather, it is a means to enhance business
processes to support business objectives. Therefore, a thorough understanding of
the clients business environment is an essential prerequisite for successful
technology management consulting. For the U.S. Postal Service, 20 years of
partnership helps ICF Consulting develop an in-depth understanding of the Postal
Service business objectives, operations, current technology base, and long- and
short-term technology strategies. For example, we are intimately familiar with the
widespread use of barcodes to tag individual mail pieces and handling units.
(Handling units are the aggregations of individual mail pieces. They include trays of
letters and sacks of parcels.) Substantial investments have already been made over
the past decades in mail processing and material handling equipment to apply
barcodes to individual mail pieces and handling units, and scan them in subsequent
sorting and distributing processes. We also have insights into how this infrastructure
will evolve over the next 5-10 years to improve operational efficiency.

In 2000, ICF Consulting performed an in-depth analysis for the Postal Service to
determine the appropriate AIDC technology to tag handling units and containers.
(Containers are aggregation of handling units. They include a wide variety of rolling
containers as well as palletized loads.) The analysis showed that the use of RFID
technology to tag handling units is problematic for several reasons. First, the cost
for both the tags and read-write infrastructure for RFID will be higher than barcode.
Keep in mind that there are 60 million trays in circulation throughout the postal
network! Second, in the intra-facility, operation-to-operation environment, the tag
life will generally be very short, (only a few hours before the next operation,) and
the cost per use will be high. Third, as more material handling becomes mechanized
via programs like the Robotic Containerization System, the environment becomes
ideally suited for barcode applications on handling units. In fact, systems, such as
the Robotic Containerization System, are specifically designed to use barcode on

Since the early 1980s, ICF Consultings postal practice has been instrumental in assisting the US Postal
Service in the development of its first Corporate Automation Plan, its first environmental management
plan; the Interoperability (mail processing equipment messaging) specifications; advanced mail processing
technologies, equipment, and operations; the Long Life Vehicle; the first National Change of Address
System; the first National Compressed Address Directory; an electronic Delivery Confirmation system; the
USPS Operations and Learning Centers, and automated vending equipment and electronic kiosks.


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Released November 30, 2004
handling units. Therefore, for the short and medium-term, ICF Consulting
recommended the continuing use of barcode to tag handing units. When RFID
technology matures and its implementation cost is significantly reduced, it may
become a more attractive technology in the future.

The situation is quite different when it comes to tagging containers. At the time the
analysis was done, there was no AIDC infrastructure in place to tag and track
containers.

Our analysis of the technologies and operations during the dock

dispatch and receipt process led us to believe that the container loading and
unloading (into and from transportation units) processes are not amendable to
using barcode technology because it would significantly reduce the speed of
operation and incur substantial labor and overhead costs. RFID, which allows passive
data collection technology, would have minimal impact on operations. While the
cost for RFID tags and infrastructure are higher than barcode, its impact is less
severe since only nine million containers and pallets are in circulation, and tags will
be reused many times before replacement. Moreover, the number of locations
needed to be equipped to program and read the RF tags on containers will also be
substantially fewer than in the case of handling units. The analysis also took into
account the likely Universal Postal Union mandate to tag containers carrying
international mail with RFID tags. Two years before the analysis was done, ICF
Consulting also assisted the Postal Service in piloting the use of RFID for container
tracking. The pilot test provided hands-on, positive experience with RFID in the
postal environment. All things considered, the analysis recommended using RFID for
tagging containers.

The hybrid strategy of using RFID for containers and barcodes for handling units
leaves a gap in obtaining nesting information at facilities that do not have
mechanized material handling for outbound dispatch operations. At facilities using
the Robotic Containerization System to load handling units into containers, as was
the case during the pilot test in 1998, a manifest is automatically created for each
outbound container. The manifest allows the handling units to be implicitly tracked
as the container is tracked. At facilities where handling units are manually loaded
into containers for outbound dispatch, the nesting information can be gathered by
manually scanning the handling units during or after the loading operation, but
manual scanning can be very costly. To address this gap, ICF Consulting continues
to assist the Postal Service in identifying and testing innovative and cost-effective
solutions combining barcodes on handling units and RFID on containers by thinking

Containers are tagged with barcodes but their use is limited to inventory control at the Mail Transport
Equipment Service Centers.

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outside the box. Unconventional use of RFID readers is a key component of these
innovative concepts.

Summary of ICF Consultings Approach

In summary, ICF Consulting has helped the Postal Service evaluate and select the
most appropriate AIDC technology for tagging and tracking handling units and
containers. ICF Consulting recommended a strategy that in the short-term combines
barcode for handling units and RFID for containers. The strategy recognizes that the
cost-effectiveness of RFID will improve in the long run, and RFID will some day
become the AIDC of choice for handling units as well. A key element of the strategy
is to closely monitor RFID technology so that the timing for adopting RFID can be
determined ahead of time and proper planning can be accomplished in a timely
fashion.

Details of the solutions explored are not being disclosed at this time while patents covering these solutions
are being filed.